This Year’s Worst of the Worst Tax Scams.
Each year the IRS compiles a list of the “Dirty Dozen”—a list of common scams that generally peak during filing season as people prepare their returns or hire someone to help with their taxes.
This year's "Dirty Dozen" have been separated into four categories:
Pandemic-related— including Economic Impact Payment theft
Personal information— including phishing, social media, ransomware and phone "vishing;"
Unsuspecting victims — including fake Charities, Senior/immigrant Fraud
Persuading taxpayers into unscrupulous actions — such as Offer In Compromise mills and syndicated conservation easements.
Pandemic- related Scams
Economic Impact Payments
Identity thieves are working hard to try to steal Economic Impact Payments (EIPs), also known as stimulus payments. Taxpayers should watch out for these tell-tale signs of a scam:
Any text messages, random incoming phone calls or emails inquiring about bank account information or requesting recipients to click a link or verify data should be deleted without opening.
Mailbox theft - frequently check your mail and report suspected mail losses to Postal Inspectors.
Taxpayers should only visit the IRS website: IRS.gov for information on payments, refunds and other tax information.
REMEMBER: The IRS won't initiate contact by phone, email, text or social media asking for Social Security numbers or other personal or financial information related to Economic Impact Payments.
Unemployment Fraud Leading to Inaccurate Taxpayer 1099-Gs
Scammers have taken advantage of high unemployment rates by filing fraudulent claims for unemployment compensation using stolen personal information of individuals who had not filed claims. Payments made on these fraudulent claims went to the identity thieves.
If you receive a 1099-g Reporting unemployment that you didn’t receive, contact your appropriate state agency for a corrected form.
You can also visit: Identity Theft and Unemployment Benefits
Personal Information Cons
Tax-related Phishing Scams
Taxpayers, businesses, and tax professionals need to stay alert to the continuing surge of fake emails, text messages, websites and social media attempts to steal personal information.
Phishing scams target individuals with communications appearing to come from legitimate sources to collect victims' personal and financial data and potentially infect their devices by convincing the target to download malicious programs.
They are cleverly disguised to look like they're from the IRS or other official agencies promising a big refund, discussing a missing stimulus payment or even issuing a threat. People should not open attachments or click on links in those emails or text messages.
Impersonator Phone Calls/Vishing
Individuals should be wary of unexpected phone calls asking for personal financial information. The IRS has seen an increase in voice-related phishing, or 'vishing,' particularly from scams related to federal tax liens. For those receiving phone calls out of the blue, security experts recommend asking questions of the caller but not providing any personal information. If in doubt, hang up immediately.
The IRS generally first contacts people by mail - not by phone - about unpaid taxes.
The IRS may attempt to reach individuals by telephone but will not insist on payment using an iTunes card, gift card, prepaid debit card, money order or wire transfer.
The IRS will never request personal or financial information by e-mail, text or social media.
Recipients of these calls should hang up before giving out any information. If anyone receives an unexpected call from the IRS that they believe to be a scam, they can report it to the Treasury Inspector General for Tax Administration (TIGTA).
Social Media Scams
Taxpayers should be aware of social media scams, which frequently use events like COVID-19 to try to trick people. Social media enables unscrupulous individuals to lurk on accounts and extract personal information to use against the victim. These cons may send emails impersonating the victim's family, friends or co-workers.
Individuals should know that any of their information that is publicly shared on social media platforms can be collected and used against them. Always review your privacy settings and limit data that is publicly shared.
Ransomware on the Rise
Financial institutions should be aware of trends and indicators of ransomware, which is a form of malicious software ("malware") designed to block access to a computer system or data. Access is often blocked by encrypting data or programs on information technology (IT) systems to extort ransom payments from victims in exchange for decrypting the information and restoring victims' access to their systems or data.
Several scams target groups such as seniors or immigrants by posing as fake charities, impersonating IRS authorities, charging excessive fees for Offers in Compromise, conducting unemployment insurance fraud and unscrupulously preparing tax returns.
Scams requesting donations for fake disaster relief efforts are especially common on the phone.
Always check out a charity before donating and do not feel pressured to give immediately.
Taxpayers can check the status of a charity, using the IRS Tax Exempt Organization Search tool.
For more information about fake charities see the information on fake charity scams on the Federal Trade Commission web site. View Here.
Immigrant & Senior Fraud
IRS impersonators and other scammers are known to target groups with limited English proficiency, as well as senior citizens. This is where a taxpayer receives a telephone call threatening jail time, deportation or revocation of a driver's license from someone claiming to be with the IRS. Taxpayers who are recent immigrants often are the most vulnerable and should ignore these threats and not engage
The IRS is providing tax information, forms and publications in many languages other than English. IRS Publication 17, Your Federal Income Tax, is now available in Spanish, Chinese (simplified and traditional), Vietnamese, Korean and Russian.
Senior citizens and those who care about them need to be on alert for tax scams targeting older Americans. The IRS recognizes the pervasiveness of fraud targeting older Americans, along with the Department of Justice and FBI, the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB).
In an effort to make filing taxes easier for seniors, the IRS reminds seniors born before Jan. 2, 1956 that the IRS has redesigned the Form 1040 and its instructions, and that they can use the Form 1040SR and related instructions.
Offer in Compromise "mills"
Offer in Compromise mills contort the IRS program into something that it's not and mislead people with no chance of meeting the requirements while charging excessive fees, often thousands of dollars. People who are having trouble paying their taxes are being duped into misleading claims about settling their tax debts for pennies on the dollar. The IRS urges taxpayer to review the information at IRS.gov to see if they might be a good candidate for the program rather than fall victim to these scams. These companies can't do anything for taxpayers that they can't do for themselves by contacting the IRS directly.
Unscrupulous Tax Return Preparers
Taxpayers should be wary of preparers who won't sign the tax returns they prepare, often referred to as ghost preparers. For e-filed returns, the "ghost" will prepare the return, but refuse to digitally sign as the paid preparer.
By law, anyone who is paid to prepare, or assists in preparing federal tax returns, must have a valid Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on the return.
Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.
Taxpayers should also remember that they are legally responsible for what is on their tax return even if it is prepared by someone else.
Unemployment Insurance Fraud
States, employers and financial institutions need to be aware of the following scams related to unemployment insurance:
Identity-related fraud: Filers submit applications for unemployment payments using stolen or fake identification information to perpetrate an account takeover.
Employer-employee collusion fraud: The employee receives unemployment insurance payments while the employer continues to pay the employee reduced, unreported wages.
Misrepresentation of income fraud: An individual returns to work and fails to report the income to continue receiving unemployment insurance payments, or in an effort to receive higher unemployment payments, applicants claim higher wages than they actually earned.
Fictitious employer-employee fraud: Filers falsely claim they work for a legitimate company, or create a fictitious company, and supply fictitious employee and wage records to apply for unemployment insurance payments.
Insider fraud: State employees use credentials to inappropriately access or change unemployment claims, resulting in the approval of unqualified applications, improper payment amounts, or movement of unemployment funds to accounts that are not on the application.